Personal finance: Giving money to your adult children
“You might want to think twice before giving money to your adult child,” said Lorie Konish in CNBC.com. It could ultimately “trigger your financial ruin.” The majority of parents with adult kids—74 percent—continue to help them financially after they reach age 18. More than 80 percent contribute to living costs, such as groceries, health insurance, phone bills, or car insurance, while 70 percent help with credit card payments, housing, or student loans. It can be a slippery slope. Experts say parents often find themselves “paying for their children’s expenses without ever having a conversation about it.” That can make a serious dent in your retirement nest egg, said Elena Holodny in BusinessInsider.com. “Run the numbers to figure out whether you can afford to help.” If you can’t, “ask your kids to start pitching in.”
It is possible “to wind down your support” without leaving your children “in the lurch,” said Diane Harris in Forbes.com. Helping them cover basic living expenses makes sense only if there is a “solid reason they can’t yet fend for themselves.” Anything more is likely “hobbling them on the path to full-fledged adulthood.” To begin closing the Bank of Mom & Dad, switch to “the no-frills plan.” You should not be offering up money so they can “take classes regularly at Soul Cycle” or “Uber everywhere.” Help them set a budget to determine if they can afford what they want. If they can’t, they should “settle for a cheaper version or go without.” This will help them “become financially savvy and resilient.” If you discuss an end date to your largesse a few months prior to making changes, they can dig out from credit card debt and save for emergencies. Better yet, educating your children from adolescence onward about budgeting can help avoid this scenario.
“Dreading the idea of having a conversation with your child about money?” asked Jillian Harding in CBSNews.com. You’re not alone: 69 percent of parents have “at least some reluctance” to talk with their kids about finances. For parents enduring financial hardship of their own, it can be “extremely uncomfortable.” But whether your own financial habits “are top-notch” or not, talking regularly about money helps “set them up for a stronger financial future.” You could begin by explaining price comparisons or collectively “calculating a tip at a restaurant.” Experts say opening the floor to your children to ask money-related questions helps ensure “it doesn’t feel like a lecture.” As they grow, “look for teachable moments,” and talk about their career goals and what sort of salaries they might expect. When they get older, be even more frank; if they don’t understand how much it will cost when they move out, they could “end up right back where they started—at home.” ■